the battle

by Arthur Brooks

In my book The Battle, I make a claim that can sound a little bit jarring to many ears: America is in a new culture war. This is not the culture war of the 1990s over God, and gays, and guns, and abortions. It’s not, as many people in Washington, D.C., would have you believe, a war between Democrats and Republicans. This is a struggle between two visions of America’s culture—the vision that says America is based on the culture of free enterprise versus the vision that says America needs to progress to European-style social democracy.Now, when I say “free enterprise,” I am referring to a system in which rewards and consequences of actions are determined by market forces and entrepreneurship. When I say “social democracy,” I am talking about a large and growing government, managed economy, and a focus on the goal of greater income equality. Reasonable people can disagree about which is the right system for our country. What I assert in my book is that we are in the middle of a culture war to decide which of these cultural visions should prevail.Among Washington’s chattering classes, there is real confusion about what’s going on in Middle America today. “What to make of all these Tea Party protests?” they ask. “Why are people getting so wrapped around the axle about a little change in policy here, a little increase in tax rates for a few people there?” The answer is as profound as it is simple: It’s about culture.It’s not just me saying that we’re in a new culture war. This is a view shared by none other than the President of the United States himself. Here’s a quote from President Obama’s commencement address at Arizona State University on May 13, 2009: “You’re taught to chase after all the usual brass rings. You try to be on this ’Who’s Who’ list or that Top 100 list. That has been part of our culture for far too long. Let me suggest that such an approach won’t get you where you want to go; it displays a poverty of ambition.” Note that Mr. Obama is talking about changing our culture (to no longer pursue “the usual brass rings” of success) rather than just changing our economy. Not everybody grasps this fact. Instead, they consider the administration’s policies today as part of an economic argument, an assortment of details about how we’re going to conduct business. But the President of the United States is not pretending any such thing. He believes we need to change our priorities, our very way of thinking in America.What might the Founders say about the “economics and culture” question? Let’s turn to Thomas Jefferson, who in 1787 said this: “A wise and frugal government which shall restrain men from injuring one another, which shall lead them otherwise free to regulate their own pursuits of industry and improvement, shall not take from the mouth of labor the bread it has earned.” Why should government not take bread from the mouth of labor that earned it? Because doing so would be economically inefficient? No, but because Jefferson believed “it is necessary to close the circle of felicities.” In other words, to take the bread from the mouth of the labor that earned it would make us a less happy nation. Thomas Jefferson understood, as did the other Founders, that how we earn our daily bread and the prosaic details of our daily lives is central to our culture.Jefferson and Obama would disagree strongly about the desirability of free enterprise—but would agree completely on its cultural centrality. Many Americans today appear to agree that the free enterprise system is fundamentally cultural. The Tea Party movement, for instance, is based on rebellion against government intrusions into the economy, including bailouts and ballooning debt.The Nation SpeaksRemember Scott Brown’s election victory in Massachusetts in December 2009? Brown won the vacant seat that had been held for more than 40 years by the late Senator Ted Kennedy—and he did it on a platform that made the moral case for capitalism. “What made America great?” he asked the Massachusetts electorate. “Free markets, free enterprise, manufacturing, job creation. That’s how we’re going to do it. Not by enlarging government.”Extraordinary! This was not a politician who was saying “a chicken is in every pot.” This was a politician who was saying the government is putting too many chickens in too many pots. He was making an ethical case for the free enterprise system—and won.So which culture do Americans prefer? The culture desired by our current leaders, whose policies are taking us in the direction of European social democracy? Or a culture based on traditional free enterprise? That’s an empirical question, and we can turn to the data for a definitive answer.In March 2009, the Pew Research Center asked a large group of Americans the following question: “Do you believe that free markets are the best way to organize the American economy, despite severe ups and downs?” Seventy percent of Americans said yes, 20 percent of Americans said no, and 10 percent said didn’t know. In January 2010, Gallup asked whether people had a positive image of the free enterprise system: 86 percent saidyes.Free enterprise is popular in America. But redistribution—a central facet of social democracy—is immenselyunpopular. The Ayres, McHenry, and Associates, Inc., polling corporation asked whether respondents believed government policies should (a) promote fairness by narrowing the gap between rich and poor, spreading the wealth, and making sure that economic outcomes were more equal, or (b) promote opportunity by fostering job growth, encouraging entrepreneurs, and allowing people to keep more of what they earned. Respondents to that survey chose option (b) over option (a) by 63 percent to 31 percent.Results from Gallup in the middle of 2009 revealed that 76 percent of Americans say business is the source of America’s strength. This is a notable finding, considering we had just gone through the most severe downturn in 50 years and the fact that malfeasance and greed were cited on the front page of every newspaper as reasons why America was in so much trouble. No matter how you ask the question, the results are stubbornly consistent: America is a 70–30 nation in favor of free enterprise.Now, compare this to our European friends. Here’s a question that a lot of international surveys ask: “Do you believe that the government should redistribute more income from rich to poor?” If you ask Americans this question, about 33 percent say yes. If you ask Spaniards, 80 percent say yes. That, in a nutshell, tells you thecultural difference between the two nations.This difference has been playing out in protests on the streets of Europe and America. But note who is protesting in America, and who is protesting in Europe? In America, Tea Partiers have been protesting government’s encroachment on the free enterprise system. They’re objecting because the government is spending too much money in bailing out too many people. Why have people been protesting on the streets of Greece and elsewhere in Europe? They’re protesting because the government is not giving them enough stuff; in the face of the worst economic, perhaps existential, crisis in decades, government won’t pay off the lavish pensions the people feel entitled to.Seventy percent of popular opinion in favor of free enterprise in America is a strong majority. So why does it appear the 30 percent are in charge? In fact, in my view the 70 percent haven’t been in charge for a very long time.Consider the most recent Republican administration, voted into power by many of the 70 percent. On its watch, we saw 55,000 spending earmarks, none of which were vetoed by President Bush. In addition, the administration advanced the largest expansion of entitlement spending in American history in Medicare Part D, as well as a 50 percent increase in the size of the U.S. Department of Education.Here are two strategies I would recommend to the 30 percent coalition if it wants to change American culture for good. The first is to increase the percentage of Americans who pay nothing for the running of the state, particularly young Americans. In other words, make sure that a bigger and bigger percentage of our citizens have no skin in the game at all. Right now, 38 percent of working Americans have no federal income tax liability. By January 2011, when the current administration’s tax reforms come into play, the number of people who have zero federal income tax liability will increase to 47 percent—and it’s only going north from there. There’s no reason to think that that this trend will ever change, unless we fundamentally transform our tax outlook.What do Americans think of this state of affairs? Two-thirds of us believe that participating financially in the tax system is part of what it means to be a citizen. It engenders a sense of responsibility for people’s actions. It helps us all remember that government isn’t free.The second strategy that will change America for good is to elevate the public sector over the private sector. A great way to accomplish that objective is to pass out a lot of government jobs. The Bureau of Labor Statistics recently reported that only two sectors in the American economy have unemployment rates below 6 percent: unpaid labor (volunteers) and government workers. Last year, the federal government created 13,000 new jobs, and it doubled the number of federal jobs that pay $100,000 or more. Today, the average government worker earns $71,000 a year. The average private sector worker earns $41,000 a year.The Route to Happiness: Earned SuccessWhy does the 30 percent coalition believe that the free enterprise system is bad for America? They believe that free enterprise does not redistribute wealth enough in society—and that’s bad for America because greater redistribution makes for greater happiness. According to this view, if we simply equalize incomes more, we would have a better, fairer, happier society.There is data to support such a redistributionist view of the world. The General Social Survey conducted by the University of Chicago in 2004 showed that people who earn $75,000 or more are twice as likely to say they’re very happy people as people who earned $25,000 a year or less. Every source of survey data available shows that in any particular community, people who are richer are always on average happier than people who are poorer. It doesn’t matter if the whole community is rich or if the whole community is poor.The belief that income inequality is due to factors besides merit is widespread among political progressives. For example, I asked the following question in a 2005 survey at Syracuse University: “Do you believe that hard work and perseverance can overcome disadvantage in life?” Ninety percent of lower-income conservatives saidyes. Among upper-income liberals, only two-thirds said yes.In other words, a third of rich liberals believe that hard work and perseverance cannot overcome disadvantage in this country. They believe that the American Dream is a false promise. Fairness, to them, requires income redistribution. And because the deck is stacked against the poor, taxing the rich is no longer just about getting enough money to pay for government. It’s about making society fairer, more equal, and more just.Now that’s a pretty logical conclusion to come to. It’s also elegant and simple, and it has motivated generations of political progressives here and around the world. But it’s wrong, because it misreads the data and it misunderstands the human heart. It’s wrong because it leaves out the key variable of our work motivation and life purpose—a variable called “earned success.”By earned success, I mean the willingness and ability to create value in your life or in the life of somebody else. When we measure earned success, we find that differences in income no longer explain difference in happiness. Money doesn’t matter, in absolute or relative terms, when people are asked about the success they think they are earning and the value they’re creating with their lives.Here’s an illustration of the importance of the concept of earned success. Imagine I asked you how successful you feel in your profession? About half of Americans say they feel very successful or completely successful in their work lives. Now take two people who are precisely the same demographically­—the same religion, the same sex, the same age, the same region of residence, the same number of kids—and both of them say they feel very successful in their professions. But one earns eight times more than the other. They will be equally likely to say that they are very happy people. Remarkably, the entire impact of money is wiped out when people perceive high levels of earned success.So what about the corollary? This notion of earned success may be well and good, but what about unearnedsuccess (or at least unearned money)? Maybe it’s just as good to get a windfall, such as inheritance, than to earn it yourself.Survey data reveal that recipients of inheritance money experience euphoria for a short period of time, but that it’s soon replaced by lingering doubts. Guilt over unearned success is a recipe for insecurity and unhappiness. The same applies to a welfare check or other government transfers—and especially to winnings from the lottery. Unearned income does not bring lasting joy. The only joy that’s attached to income comes from earned success, and the joy is because of the success itself, not because of the money.So what does all of this imply for the notion of redistribution as a means to a better, fairer, happier America? Simply put, redistribution won’t get you there. Income inequality per se doesn’t cause unhappiness, and income redistribution per se will not increase our level of flourishing. In fact, spreading money and not earned success around actually attenuates the ability, willingness, and incentives for people to earn their success.Here’s the great paradox of redistribution: While it seeks to increase happiness by spreading money around, it really delivers unhappiness because people have less of an incentive to earn their success. That’s why I believe that the free enterprise system is not just an economic alternative. The free enterprise system, which matches skills and passion so people can earn their success, is a moral imperative. It’s a positive moral good and not just an economic alternative.The research shows that it doesn’t matter if your earned success is denominated in dollars or something else. In my previous book Social Entrepreneurship, I explored this phenomenon. I discovered a whole class of people who didn’t have any money to speak of but were really entrepreneurial in the nonprofit sector. Guess what? They were very happy because they were earning their success in explosive rewards that were not counted up in green pieces of paper. Rather, they were getting counted up in the number of souls saved or kids who can read or parks cleaned up. They were counting their rewards in a different denomination, and that’s earned success too.So remember—when we talk about earned success, we’re not just talking about money. As a matter of fact, we’re not talking about money at all. This is really what our Founders meant when they said that we had the inalienable right to pursue our happiness. We pursue our happiness by living in a system that guarantees the freedom we have as Americans to earn our own success.How We Can Win the Battle—and Why We MustThere are three things we can do to fight for the free enterprise system, to engage in The Battle (the title of my book). The first is simple—and that is to live according to our principles: to work, to create wealth, to be employed joyfully, and to pass up the government dole. These are ethical propositions. And they reinforce the system that we cherish.The second way that we fight the battle is by getting involved in the public policy process. The grassroots activities that we see today are an indication that Americans are recapturing a sense that their culture is at risk. But this grassroots activity desperately needs an “intellectualization.” It needs robust ideas and involvement with policymakers, holding them accountable when they say they’re changing our economy while actually they’re changing our culture. It also means getting involved with organizations that have dedicated themselves to this fight.The third “battle plan” is to make sure we don’t lose any more arguments about the free enterprise system. And the way to do that is to get the facts right. Here are the three big things we need to know:1. The free enterprise system is a mainstream value, a 70–30 belief. It’s not just a right-wing thing, not part of the conservative movement, and not “Republican” or “Democratic.” It’s a mainstream belief and we have to stand up for it as such.2. The primary case for the free enterprise system is cultural, not economic. When we get backed into a corner and say that the reason we like free enterprise is because it’s economically efficient, that’s when we start to lose the argument. The stakes are so much higher than economic efficiency. We have to focus on what the system really means for helping people earn their success.3. Don’t give ground on the fairness question. Over and over again, we’ve heard the administration argue for more and more redistributive public policy. We’ve been told that what we really need is a sense of “fairness and balance in our economy.” Well, the data tell us that most Americans see fairness as a system that rewards hard work, merit, and excellence, and penalizes free-riding and corruption. That’s actually a pretty good definition of the free enterprise system.If you work harder than your neighbor and you retire with the same amount of resources, that’s actually not fair—it’s unfair according to most Americans. If you pay your mortgage, even though it’s underwater and your neighbor walks away without recourse, that’s not fair—it’s unfair. We need to take back the entire concept of fairness. Most of our ancestors did not come to this country because it offered greater government redistribution programs than their home country. They came because this country offered the opportunity to earn success and real fairness at the same time.Here’s why I believe the battle is really worth fighting. What we care about in the free enterprise movement is not just efficiency and money. What we care about is happiness and human flourishing. Those are the ideas on which our country was founded. Free enterprise is the best system to allow the most people to achieve the most earned success—and it’s this system that has set more people free and improved more lives than any other.The free enterprise system has led to an unimaginable world of prosperity, as people around the globe have sought the fruits of our system. Then they shared their own earned success via amazing advances in science and medicine that we never would have seen had people not been able to enjoy the rewards of their ingenuity. The education of millions of children, the end of tyrannical and collectivist regimes, and the spread of democracy—these are the fruits of the American free enterprise system.In my view, free enterprise is the most profound expression of American values and one that has radically transformed the world over the past 200 years. There are Americans fighting and dying today for these values. And it’s my view that it’s the very least we can do to stand up for these values here at home.Arthur C. Brooks is president of the American Enterprise Institute. This essay is adapted from a Bradley Lecture he delivered at AEI upon the release of his newest book, The Battle.